TOKYO: Benchmark US Treasury bonds rose in Asia on Tuesday, as investors sought safe-haven assets after optimism faded that a weekend deal to prop up Spain's debt-laden banks would decisively stem a euro zone debt crisis.
Three US Federal Reserve policymakers amplified their concerns over Europe's crisis on Monday.
Atlanta Fed President Dennis Lockhart welcomed the Spanish bank deal but said it was just one of "many issues that Europeans are going to face."
San Francisco Fed President John Williams called the European debt crisis "a significant threat to financial stability," while Chicago Fed President Charles Evans said the crisis "does give one pause about what it means for the US economy and the global economy."
European financial leaders agreed over the weekend to lend Spain up to 100 billion euros ($125 billion) for its bank rescue fund.
But the move failed to placate nervous investors. Spanish 10-year bond yields rose on Monday and the cost of buying debt protection on Spain in the credit default swap market reached near-record highs at around 595 basis points, according to Markit. Italy's debt yields and CDS costs also rose ahead of that country's debt sale on Thursday.
"We're seeing a retracement of Monday's losses, showing yesterday's move was just a chance to lock in some gains, and not a turning point in Europe's crisis," said a fixed-income fund manager at an asset management firm in Tokyo.
The yields on 10-year notes inched down to 1.59 percent from 1.60 percent in late US trade.
They were sharply down from 1.71 percent in Tokyo on Monday, moving back toward their record low of 1.44 percent touched on June 1.
The yields on 30-year bonds edged lower to 2.71 percent from 2.72 percent in late US trade, well below 2.84 percent in Tokyo on Monday.
Later on Tuesday, the Treasury Department will begin this week's sales totaling $32 billion in new three-year notes, $21 billion in reopened 10-year notes and $13 billion in an older 30-year bond issue.
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